Use the following information for the next 2 questions: Grasshopper Inc. is considering a 5-year project...

Use the following information for the next 2 questions:

Grasshopper Inc. is considering a 5-year project amid the pandemic shutdown. They need to buy a new IT system for $32,000. The new system also requires an increase in net working capital of $4,000.

Grasshopper expects $16,000 in sales and $7,400 annual operating expenses. Annual depreciation is $8,000.

If the firm's tax rate is 21% and its cost of capital is 12%,

59) How much is their annual OCF?

Question 59 options:

	$8,474
	$600
	$8,599
	$5,277

What is the NPV of this project assuming the same CF for 5 years?

Question 60 options:

A) 2,547

B)-5,453

C)-1,453

D)1,423

Solutions

Expert Solution

59) How much is their annual OCF?

$8474 Option A

60. What is the NPV of this project assuming the same CF for 5 years?

-$5453 Option B

Please dont forget to upvote

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Use the following information to answer the next 5 questions. Your corporation is considering investing in...

Use the following information to answer the next 5 questions. Your corporation is considering investing in a new product line. The annual revenues for the new product line are expected to be $306000 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $59900. The old equipment currently has no market value. The new equipment cost $55400. The new equipment will be depreciated to zero using...

Questions 4-8 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS: Pitchfork, Inc. sold merchandise...

Questions 4-8 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS: Pitchfork, Inc. sold merchandise to Min Corporation on June 1, 2019 and accepted an interest-bearing note with an 8% APR. Min agreed to make annual payments of P&I in the amount of $27,000 per year for 5 years with the first payment being made immediately. The remaining payments are to be remitted each June 1st. Pitchfork’s year-end is December 31st. Min’s normal cost to borrow is 8%. Required:...

USE THE FOLLOWING INFORMATION FOR THE NEXT 2 INDEPENDENT QUESTIONS: Tremaine Inc. has three product...

USE THE FOLLOWING INFORMATION FOR THE NEXT 2 INDEPENDENT QUESTIONS: Tremaine Inc. has three product lines: A, B, and C. A B C Total Sales $50,000 $85,000 $90,000 $225,000 Variable costs 30,000 30,000 44,000 104,000 Contribution margin 20,000 55,000 46,000 121,000 Fixed costs 23,000 25,000 18,000 66,000 Net income $ (3,000) $30,000 $28,000 $ 55,000 28. Management is considering dropping product line A. If it is discontinued, $18,000 of its fixed costs are DTFC & can be avoided....

USE THE FOLLOWING INFORMATION FOR THE NEXT 2 QUESTIONS Cornell Products has the following information available...

USE THE FOLLOWING INFORMATION FOR THE NEXT 2 QUESTIONS Cornell Products has the following information available for 2020: UNITS BEGINNING INVENTORY-----0 UNITS ENDING INVENTORY----5,400 UNITS COSTS Direct materials $1.00 per unit Direct labor $2.00 per unit Variable manufacturing overhead $1.50 per unit Variable selling and administrative costs $ .50 per unit Fixed manufacturing overhead $30,000/6,000 = $5.00 per unit Fixed selling and administrative costs $25,000 During 2020, Cornell produced 6,000 units out of which 5,400 units...

Use the following information for the next two questions. You are creating a cash flow project...

Use the following information for the next two questions. You are creating a cash flow project for your new venture, CBD IPA, a cannabis-infused beer and have made the following assumptions for the business: First year sales of 10,000 cans, rising by 10% each year Price per unit of $4.00 each, rising by 2% per year Operating expense equals first year sales revenue and rises 10% per year What is the projected sales revenue of CBD IPA in year 3...

Use the following information for the next four questions: Question 16: The Umbrella Corporation is considering...

Use the following information for the next four questions: Question 16: The Umbrella Corporation is considering expanding one of its production facilities to research a new type of zombie, which will hopefully not result in another zombie outbreak. The project would require a $21,000,000 capital investment and will be depreciated (straight-line to zero) over its 3 year life. They know that they will be able to salvage $8,500,000 for the equipment at that time. Incremental sales are expected to be...

Use the following information to answer the next 5 questions The following balances were taken from...

Use the following information to answer the next 5 questions The following balances were taken from the adjusted trial balance of Pear Corp. for the fiscal year ending December 31, 2012. Cash $ 22,500 Accounts Receivable 12,000 Depreciation Expense -- Equipment 3,500 Equipment 54,000 Accumulated Depreciation – Equipment 5,500 Accounts Payable 6,000 Interest Payable 1,000 Unearned Service Revenue 2,000 Common Stock 40,000 Dividends 1,000 Notes Payable, Due 5/1/2013 22,500 Rent Expense 3,000 Interest Expense 1,000 Wages Expense 24,500 Retained Earnings,...

USE THE FOLLOWING INFORMATION FOR THE NEXT 3 QUESTIONS Pearson Inc. produces and sells a variety...

USE THE FOLLOWING INFORMATION FOR THE NEXT 3 QUESTIONS Pearson Inc. produces and sells a variety of household cleaning supplies and equipment including vacuum cleaners and carpet cleaner both of which are sold separately in stores. The carpet cleaning division incurs the following costs for the production of a single bottle of carpet cleaner when 600,000 bottles are produced each year: Direct materials $1.30 Direct labor .50 Variable overhead .25 Fixed overhead .30 Total cost $2.35 The company sells the...

Use the information in the table above for the following 5 questions. A capital investment project...

Use the information in the table above for the following 5 questions. A capital investment project is estimated to have the following after-tax cash flows, by year: 0 1 2 3 4 -$30,000 $7,500 $12,500 $5,000 $15,000 The company utilizes a discount rate of 10% to evaluate capital projects. You may have rounding errors in your calculations so choose the closest answer. Assume cash flows occur evenly over the year. The PAYBACK for the project shown above is: 2.16 3.33 3.15...

Use the information in the table below for the following 5 questions. A capital investment project...

Use the information in the table below for the following 5 questions. A capital investment project is estimated to have the following after-tax cash flows, by year: 0 1 2 3 4 -$50,000 $15,000 $17,500 $17,500 $25,000 The company utilizes a discount rate of 20% to evaluate capital projects. You may have rounding errors in your calculations so choose the closest answer. Assume cash flows are received equally over the year. The NET PRESENT VALUE for the project shown above...

Subjects